A discussion about server side programming (particularly, but not exclusively related to Java), plus other bits about the software development life cycle, quality assurance / bug tracking, the IT industry, and life in general...

Friday, September 17, 2004

Starting a business - things to consider...

I've been talking to various friends, and I'm constantly readingblogs about people out of work, and thinking of starting up their own business... As someone who's started a couple of businesses, I don't claim to know everything, but I've learned a thing over two either directly, or through observations of clients I have worked with...

First of all, for most people, money doesn't just fall into peoples laps - if it did, humans would have all just evolved giant laps to catch all of the money, and we'd all be happy... Most people that get money have to be smart, hardworking, and/or lucky (and combinations of these are a bonus)...

It's one thing to gather stats on how many people use / benefit from a free service, but how many people will actually PAY for that service... I wanted to look around for a good example, and came across an excellent example, SorceForge... It's been around for 5 years, has gobs of users, provides a truly valuable service... How much money did they actually collect? Well, looking at the supporter log, we can see that of the bazillion source forge users (who, many have been using the service for years...), 55 made contributions in July (and publicized it...) ... No idea how much the contributions are for, or how many weren't publicized, but if 100 people total made donations, someone needing $3500 / month would have needed the average donation to be $35... And if they were incurring expenses (I suspect SourceForge doesn't just run itself, it's got hardware / software / additional labor expenses / etc...), and the SF people were counting just on these donations, they'd be in a world of trouble...

Think that the guy running the corner store is raking in dough? We'd all be running corner stores if that was the case ... He has competition, he has margins, he has expenses, he probably works over 16 hours a day, he's probably just getting by... If he's driving a Mercedes, it would be thanks to years and years of hard work, struggling to make ends meet.

Think about everyone you interact with in a day... How many stores do you walk by, without going in? Going in and not buying anything?

All business plans should be realistic and include not just what you think you can get, but also a worst case scenario, and a plan for what happens if that were to occur...

I remember talking with a friend last year, who had a nice little severance package, and was starting a business (with a great idea, clear idea of who his customers were, and why they needed the product)... One of the phrases that came out of the mouth of either himself or his wife was something to the effect that he'll just work 20 hours a week, and make as much money as he did as a salaried employee, if not more... My wife was with me, and immediately looked at me, giving me a "just wait..." look in her eyes... His business is now starting to do well... but he's lucky to be home by midnight most days...

I'm not saying that starting a business is impossible - millions of people do it, and many of them succeed... I'm just saying to be prepared to put in some effort, and be prepared to handle many of the crap jobs that need to be handled at a new / growing business...

10 Comments:

Anonymous said...

You couldn't me more right. I'm a co-founder of a start-up. I went the whole first year with no salary. I've worked for very little the past year. I work about 18 hours a day, 6 days a week. I believe that the reason most businesses fail is because the people weren't willing to put in the necessary work.

You have some very good ideas. I probably work 18-20 hours at a time, seven days a week. The first year or two will be the hardest. For those looking to start their own, it's definitely worth it...one thing I've learned is _always_ draft and sign a contract for work done. So many people looking to screw over small business contractors because they think they can.

It's humorous to see so many entrepreneurs claiming to put in 18 hour days - day in and day out. That's absurd. One - it's absurd to think you need to do that to start a successful business and, two, it's almost physically impossible. People pushing themselves that hard, that fast probably aren't very organized.

I have been in business since 1997. It has been a long hard road for us to get where we are and I still don't own a fancy car and am happy to have a roof over my head and food on the table every month. When I started the business I worked at it part time while working full time as a software developer. When I got laid off needed to go full time I went from $150,000 a year to $50,000. Right after this 9/11 took place and we saw a dramatic decrease in sales, thanks to the downturn in the Internet, high-tech industries and the economy in general.

Benefits? What benefits, I get to take all the vacation and holiday time I want to pay for. If my wife of 26 years didn't work, we wouldn't have insurance.

Would I do it again? In an instant!Why - While I work long hours, I more or less get the pick the hours. This is something I am building up little by little. I try and take time to know my customers and their needs and consider many of them friends. Sales are increasing as I expand offer new services and build my client base. And best of all, I have 4 adult children who all worked for me at one time or another and were able to learn some good business skills, which have helped them in their careers.

Being self employeed isn't for everyone. I personally have a hard time even thinking about going back to work for anyone else.

Suggestions? 1. Don't start underfunded or on a shoestring. 2. Make sure you understand your market, customers and products. 3. Have a buiness plan. While we were profitable after 90 days, it enough to put food on the table. 4. Have a contengency plan for emergencies. What if that critical server goes down? What will you do? 5. Learn to network with other businessmen. This is an area which I am still learning.

All points here are very valid. Starting a business is not easy thing. I've been doing it officially for about one year now and has not been all rosy. I've learned that you'll do a lot of running around if you do not have a procedural system in place for tracking activities.

It's humorous to see so many entrepreneurs claiming to put in 18 hour days - day in and day out. That's absurd. One - it's absurd to think you need to do that to start a successful business and, two, it's almost physically impossible.

I've been running my business for about one year now... It's harldy what I call successful, but it pays my bills, and I enjoy my work. Things have finally started to pick up the past three months. I actually work 18-hours for two or three days a week, and 6-8 the other few days. I don't work on Sunday, I try not to on Saturday, my family needs me too.

But the bottom line is that to make it, you do need to put in the hours. To think you can be successful without the hard work is just not reasonable.

I agree that starting a business can be very challenging and time consuming. Some aspects to consider are structuring your time as not to completely burn yourself out, not underpricing your services and paying for this mistake with your would-be time off, drafting a viable business plan, forming contracts with partners to avoid confusion later on, and encourage referrals from your best clients. I know someone who runs a helpful seminar dealing with the challenges of early-stage businesses: